Subsidizing the Super Bowl

May 14, 2013

Did you know that you’re subsidizing some of the world’s wealthiest sports owners and athletes? I didn’t, until I read about Senator Tom Coburn’s (R-OK) new bill this morning:

A lesser-known fact is that the NFL, as an organization, is a 501(c)(6) tax-exempt organization. That means the league doesn’t have to pay federal income tax on its estimated $10 billion in revenue (that number is expected to grow to roughly $25 billion by 2018). If that seems a little ridiculous, it is. That’s where Oklahoma Senator Tom Coburn comes in. According to The Newark Star-Ledger, Coburn has crafted an amendment that would strip the NFL, NHL and PGA of their tax-exempt status. “Based on the publicly available information about the NFL and NHL alone, [revoking] non-profit status may generate at least $91 million of federal revenue every year,” Coburn said.

How does this happen? Huge technicalities:

Technically the league does fall under the parameters to be a 501(c) organization, so it would take the government believing they are getting the short end of the stick with the definition of a non-profit business association for congress to pass a new law and change the situation. Here is a tangible example from the Star-Ledger showing how the process works:

“The league collects $6 million in annual membership dues from each team, the teams write off those dues as ‘charitable donations,’ and the NFL in turn takes that $192 million and puts it into a stadium fund that gives owners interest-free loans as long as they secure public financing for their new or renovated stadiums.” That means the taxpaying public loses out on federal tax revenue while also paying for stadiums that generate pure profit for no one else but team owners.

Like any other non-profit status, 501(c)(6) organizations follow complex laws. According to the IRS, the status type initially became law because of the Chamber of Commerce, and professional football was added in 1966. Tweaks were made to help professional football later on.

Of course, one opponent of the bill claims jobs will be hurt, and notes that when it comes to investing in new stadiums, “Senator Coburn’s bill is nothing more than a job-killer, robbing cities and regions from having new sports facilities, and employing people to build and to run them.”

He also points out that $91 million is simply not a lot of tax revenue compared to the federal budget or current tax revenues.

In the end, the question largely comes down to simple ethics: should taxpayers subsidize professional sports? Sure, it may hurt the enjoyment of games, as teams may shut down. Players and owners might make less money. The cost of tickets may go up. And $91 million is not a lot compared to the spending and taxing of Washington. But is it right that you are subsidizing a sport?

Additionally, if sports teams are so economically sound, consumers will pick up the slack. Pretty simple economics – especially since the job losses claimed above are only relevant because of decades of subsidization and market distortions.

I’ll give Tea Party Patriots national support team member Shelby Blakely the last word on this, and the biggest reason this taxpayer subsidy should stop: “Where is sports teams’ subsidization in the Constitution?”

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Did you know that you’re subsidizing some of the world’s wealthiest sports owners and athletes? I didn’t, until I read about Senator Tom Coburn’s (R-OK) new bill this morning:
A lesser-known fact is that the NFL, as an organization, is a 501(c)(6) tax-exempt organization. That means the league doesn’t have to pay federal income tax on its estimated $10 billion in revenue (that number is expected to grow to roughly $25 billion by 2018). If that seems a little ridiculous, it is. That’ read more >